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Is there a big difference between price and cost?

How do you imagine most independent builders go about pricing their jobs? Do you know any of your customers who are in a markup rut, meaning that they arrive at their bid by marking up their cost? Regardless of what their costs are, they generally target a similar gross margin. The reason so many contractors choose this approach to pricing may vary, but one of the big reasons is because of its simplicity.

The price is more likely to become an issue when the customer says something like, “You can do better than that,” or, “Is there any way you could sharpen your pencil on this quote?” Or maybe the salesperson answers with, “Where does my price need to be to get the order?”

And price is also more likely to become an issue when the salesperson opens conversation with a prospect with a statement like, “Would you like for me to put together some prices for you so you can get an idea how we stack up against the competition?” While price is only one aspect of cost, price is the most likely variable that salespeople and buyers zero in on, at least initially.

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As a general rule, most salespeople put their prices in writing before the contractor commits to buy. This is especially the case with relatively new customers and prospects.

If it is important to list your prices, it should be even more important to also list the values your company commits to provide in the course of servicing the customer’s business.

There are service issues that can occur during the construction process that a lot of builders and salespeople never address.

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Consider these examples:

  • Potential damage to large, high-value trees with delivery equipment.
  • Damage occurring when delivering bulky material through second story windows.
  • Dropping material on the wrong job that could delay construction for several days.
  • Salespeople failing to special order products, thereby delaying the closing of the home by sometimes several weeks.

By documenting the added cost of such service snafus, builders are in a position to put a price tag on dysfunctional operations at the store level. The store’s track record over a measurable period of time all of a sudden becomes a documented selling tool or a documented warning.

The typical approach to buying building materials leads the buyer to shop prices to save relatively few dollars while the big bucks are frequently lost to oversights on the blueprints, mistakes, delays in the flow of materials from the manufacturer to the local LBM dealer to the jobsite, etc. As a salesperson, your mentality is critical to the price you are able to sell your products and services for.

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Based on my experience working with my clients in the field, salespeople in our industry frequently leave money on the table when they price a job. Down deep inside, a lot of salespeople are scared to death that they are going to lose a sale to a lower-priced competitor.

My recommendation is that you begin listing your company’s service commitments in addition to your product commitments. As we all know, all service is not equal. If you are conscientious enough to dot all of your i’s and cross all of your t’s, you are worth full price for the products you sell and the services you and your company render. Salespeople with the lowest price are always going to get some of the business, but certainly not the lion’s share.

Builders pay top dollar for dependable service and well-trained and conscientious salespeople. The key to your effectiveness is in your mind and your belief system. Believe in your personal worth and that of your organization.

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